Monday, May 24, 2010

Looking Bleak

Wow - today looked ugly. Ugly ugly ugly. There was no volume all day long until the very end. Despite that the markets stayed very close to the break even line as the idea of buying just wasn't appealing to people. Well those who wanted to sell finally gave up hope waiting for higher prices and dumped right into the close as volume spiked. Very bearish short term action. I was shorting towards the end of the day as well putting some of what I took off from late last week. Wish I would have done more.

Asia right now is getting pummelled. North Korea is reportedly preparing for war as tensions escalate over the sinking of the South navy ship. China, after rebounding yesterday, is giving it back tonight as are commodities.

The CajaSur bank nationalization in Spain I think is going to be a bigger story than most investors originally gave it credit for. I was watching the Spain etf (EWP) all day and it was down 5.24%!!! Massive move for an entire market. Today the fallout has already begun as 4 more big banks are in trouble working on merging together. This also seemed to greatly impact the Euro.

Despite all of this I am a very nervous bear right now. This may sound counter intuitive but I am extremely nervous because I am having trouble seeing what is going to send the market up in the foreseeable future. You would think that would bring comfort but it terrifies me because that is how you get your face ripped off. Two weeks ago it was the 1 trillion European package and I saw that coming and I figured there would be a rally into option expiration and the passage by German's parliament of the $1 trillion package. However, as I look forward I am not seeing much or envisioning much that can stop the market from going downward. We are very oversold and getting caught off guard with a surprise announcement that you didn't see as a possibility would not be fun.

With that said the U.S. futures are down over 1% and it feels like it would make sense to short right here. In general it sure seems like the markets are going to slice through the 1055 area onto the other heavy area of resistance that sits around 1040 to 1050 (centered around 1045). It still seems improbable that we would work through that resistance this oversold before bouncing again toward 1100 but it is becoming more possible especially if Europe continues the market selling Asia is experiencing. In general I think you have to start covering some, taking some profits between 1045 and 1050 and look to short again below 1040. Odds of a bounce seem to great not to take a few chips off the table.


Justin said...

What do your reckon the odds of dropping below 10,000 are? And, when/if it happens, if it is likely to lead to further falls.

I'm not really into technical analysis but you can't deny that some levels are pretty important (even if just pyschologically)

Market Seer said...

In what time frame? Tomorrow (probably at the open) it is almost for sure we will be below 10,000.

I guess your asking if we will stay below it? I think we are going back to 8,000 in a few months. We could bounce sure but any bounce I think is temporary. The myth of the rally is being completely unwound.

Market Seer said...

In fact right now the futures are point to the fact we will open below 9900.

llano llama said...

However unlikely it seems at the moment, BP stopping the leak would probably spark a rally.